New Home Sales Down By 8.4 Percent June 2012, Is QE3 Coming Next Week?
The housing market has been making a comeback recently but our analysis shows that in the long run, the homes will suffer from high unemployment and low income growth. The U.S. Commerce Department said today signed contracts to purchase new homes fell 8.4 percent from the prior month. The report comes a few days after a news broke last week that showed existing home sales fell by 5.4 percent month over month, according to the National Association of Realtors as real estate investors focused on high-end properties.
New home sales were up 15 percent from a year ago but this is a year over year comparison from dismal levels and June is one of the most popular months for home shopping which suggests the decline could continue into the end of the year. Ford and GM have reached new multi-year lows and the early year strength in the housing and the automobile market may be unwinding.
Is QE3 Coming Next Week?
Yesterday in late trading, the Wall Street Journal featured a news report that the Federal Reserve Bank was considering more measures to stimulate the economy as early as next week. We believe they are behind the curve and should have already ‘gotten to work’. The bond market is in a bubble and traders in fixed income have gained from increased bond prices, with no risk even though yields are effectively negative. The Fed has enough data from a full quarter of weak unemployment now followed by low housing numbers and declining automobile sales. For that matter, consumers can’t even afford a new iPhone (although the iPhone 4S was by no means revolutionary and SIRI doesn’t really work). The Fed could face time-liquidity constraints if they delay action too long and we expect a move from the Fed before the September 2012 meeting regardless of political economy concerns. GDP will come in at 1.3 percent +- 0.3 which is below the 1.7 annualized 2011 rate and confirms the rate of GDP growth is negative. The U.K. is in it’s third quarter of double dip recession, Spain is experiencing lower growth along with China. The Fed has enough data – it’s time to act.